Hulu Suitors Line Up

Yahoo Inc. submitted a bid on Friday to acquire Hulu, according to a person familiar with the matter, as the Internet company tries to add more high-quality online video that can appeal to advertisers.

Ignored and scorned by peers for years, but now suddenly surrounded by suitors? It's not the plot of a teen movie, it's what's happening with Hulu. Heard on the Street's Miriam Gottfried joins MoneyBeat. Photo: Getty Images.

As of Friday afternoon, seven companies had submitted bids for Hulu, several of whose interest has been previously reported, the person familiar with the matter said. They include pay-TV operators DirecTV and Time Warner Cable Inc.; Guggenheim Digital Media; private-equity firm KKR; the investment group of former News Corp. President Peter Chernin; and Silver Lake Partners, bidding with William Morris Endeavor, the person said.

Hulu was founded in 2007 as a way for major broadcast networks to deliver their TV programming online. It offers a catalog of more than 70,000 full TV episodes, including the current seasons of hit shows. The site's owners are Fox parent News Corp., ABC parent Walt Disney Co. and NBC parent Comcast Corp. (For regulatory reasons, Comcast can't vote its stake.) News Corp. also owns The Wall Street Journal.

Earlier

As the owners have invested in other digital video initiatives—building up their own websites, streaming shows to pay-TV subscribers through a strategy called "TV Everywhere," and licensing some content to other subscription video players like Netflix Inc. and Amazon Inc.—questions about where Hulu fits in their broader plans have arisen.

The value of the bids for Hulu isn't clear. The price potential buyers are willing to pay will depend largely on whether the broadcasters are willing to continue licensing current seasons of their TV shows to the site for a long period. The bids submitted thus far, which are nonbinding, will be whittled down in coming weeks and the parties will negotiate over content licensing, the person familiar with the matter said. It is possible no sale will happen. It's also possible one of the bidders could end up taking a minority stake in Hulu, a person familiar with the situation said.

The site had roughly $700 million in revenue last year and more than four million customers for its $7.99 per month subscription service as of March 31. Larger rival Netflix had nearly 28 million paid streaming subscribers in the U.S. at the end of March.

Yahoo's bid comes after the Internet company earlier this week announced its $1.1 billion acquisition of blogging site Tumblr. In recent years, multiple leaders of Yahoo have coveted Hulu and engaged in deal talks with the site, people familiar with the matter have said. Yahoo withdrew its most serious effort—a bid in late 2011—because of its own troubles, including a management shake-up that ended with Yahoo considering whether to sell itself.

News of Yahoo's bid was first reported by AllThingsD, while the bids from KKR and Silver Lake were first reported by Bloomberg.

For Yahoo, Hulu's attraction is its slate of high-quality programming, which generates revenue from big brands who advertise on TV. Yahoo and other Web companies are struggling to produce or acquire the kind of programming that would encourage advertisers to spend more of their budgets online.

Yahoo has faced numerous challenges in recent quarters with its core graphical- and video-ad sales, as it faces increased competition from Google Inc. and its YouTube video site, Hulu, Walt Disney Co.'s ESPN.com and social network Facebook Inc., among others.

In the first quarter of this year, Yahoo's display-ad revenue, which represents about 40% of the company's sales, dropped 11% from a year earlier to $455 million on declines in the number and prices of graphical and video ads.

To boost the amount of video content and video-ad space on Yahoo, the company earlier this year sought to acquire a majority stake in French video site Dailymotion, but the $200 million deal fell apart after the French government intervened to halt the sale.

—Christopher S. Stewart and Shalini Ramachandran contributed to this article.

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